Electric truck maker Nikola Corp. filed for Chapter 11 bankruptcy protection on Wednesday after the company failed to overcome market and macroeconomic challenges.
“Like other companies in the electric vehicle industry, we have faced various market and macroeconomic factors that have impacted our ability to operate,” CEO Steve Girsky said in a statement.
Girsky said the company has taken “numerous actions” to raise capital, reduce liabilities, clean up its balance sheet and preserve cash to sustain operations in recent months, but it wasn’t enough to overcome the “significant challenges” the company had been facing. He said that filing for bankruptcy protection was the “best possible path forward” for the company and its stakeholders.
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As of Wednesday, Nikola has around $47 million in cash to keep things running while it tries to sell off assets and reorganize. The company is also seeking court approval to sell its assets quickly to make sure it has enough money to cover costs during the bankruptcy process.
It hasn’t been smooth sailing for the company, which went public in 2020 and, in short order, formed a strategic partnership with General Motors in which the Detroit automaker received a $2 billion equity stake in Nikola.
Founder Trevor Milton, who stepped down in 2020, was sentenced to four years in prison in 2023 for engaging in securities and wire fraud in connection with a scheme to defraud and mislead investors about the development of products and technology at Nikola, according to prosecutors.
In 2023, the company recalled hundreds of its big-rig trucks and halted sales of others after it discovered that a coolant leak inside a single battery pack was found to be the probable cause of the truck fire at the company’s headquarters in Phoenix in June of that year.
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In addition to weak demand and operational challenges, the company has seen rapid turnover within its C-suite. Three different CEOs took over within a two-year period. Girsky took the helm in August 2023, but even under his leadership, the company’s capital was rapidly decreasing.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| NKLA | NIKOLA CORP. | 0.47 | -0.30 | -39.13% |
“We are examining every opportunity to optimize cash,” Girsky said on the company’s third-quarter earnings call in October. He estimated that the company only had enough cash to fund its forecasted operating costs and meet its obligations through the first fiscal quarter of 2025.
Its stock has plunged more than 70% year to date.
“The electric vehicle industry has continued to struggle amid increasing competition, operational challenges and high costs, leading most EV manufacturers that turn to Chapter 11 to look towards an asset sale, or even a liquidation, rather than a reorganization of the business,” Sarah Foss, head of legal at Debtwire, told FOX Business.
Foss said Nikola is following a similar path in bankruptcy, like startup Fisker, which used its June 2024 bankruptcy to effectuate a sale of its assets; Lordstown Motor, which sold the majority of its assets to a vehicle of the company’s former CEO; and Proterra, which sold its business lines in its August 2023 bankruptcy.
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